Should SEA Group stop pouring capital in Shopee?

· April 8, 2020 ·

While Garena has constantly recorded high profits for years, Shopee has been submerged in tremendous losses SEA Group’s latest financial report showed a large gap in earnings between its e-commerce and game businesses. While Garena has been constantly recording high profits for years, Shopee has been submerged in tremendous losses. In 2019, Shopee’s gross merchandise value rose 71 per cent to $17.6 billion. Its adjusted revenue increased by 224 per cent to $942 million. However, its earnings before interest, tax, depreciation, and amortisation (EBITDA) index showed negative growth. The gross profit margin reflected that Shopee has been offering tremendous discounts to gain market share and accelerate turnover. Meanwhile, the game business Garena has showed an impressive growth. Last year, Garena reported $1.8 billion in revenue and $1 billion in pre-tax profit, equivalent to the EBITDA of 40 per cent. According to Tech In Asia, even if Shopee reports profit, its gross margin will be tiny compared to Garena’s. In other words, Shopee is burning money earned by Garena. Specifically, the e-commerce platform splurged $765 million out on sales and marketing to get $942 million in revenue and lose $1 billion last year. Garena’s sales and marketing expenses were $109 million but the turnover… Read full this story